Sports betting is leading to costly credit card fees for gamblers
of ConsumerAffairsAs sports gambling continues to expand across the United States, with online sports betting now legal in 38 states, consumers are increasingly encountering unexpected financial pitfalls, especially if they are putting their wagers on a credit card.
Last year alone, nearly $120 billion was wagered on sports, but many bettors are facing steep "cash advance" fees when using credit cards for these transactions. The Consumer Financial Protection Bureau (CFPB) has highlighted the financial implications of using credit cards for sports betting, showing that lenders often treat these transactions as cash advances, leading to significant fees and interest charges.
In a recent analysis, the CFPB examined credit card agreements from major issuers, consumer complaints, and data from states like Kansas and Ohio, where sports betting was recently legalized.
The findings indicate that most credit card companies, including Chase, Discover, and American Express, classify online gambling transactions as cash advances. This classification triggers high fees and interest rates, which can catch consumers off guard.
Cash advance fees are not cheap
Cash advances typically incur fees that are either a flat rate or a percentage of the transaction, whichever is greater. For example, a $20 sports wager could incur the same $10 fee as a $200 cash advance withdrawal from an ATM.
Additionally, cash advances begin accruing interest immediately at rates often around 30%, significantly higher than regular purchase rates. This means that even small bets can quickly become costly, with fees and interest accumulating rapidly.
The CFPB's analysis of credit card use in Kansas and Ohio showed a spike in cash advance fees following the legalization of sports betting. The Bureau suggests that many consumers are unaware of the financial consequences of using credit cards for gambling, as disclosures about these fees are often unclear or inconsistent. Complaints from cardholders indicate a lack of transparency from both sportsbooks and credit card issuers, leading to confusion and unexpected charges.
Also, you could lose
And of course, the bettor could lose. They dont lose their own money, they lose money they dont have, but will have be pay back, along with the fees.
To their credit, not all credit cards allow sports betting. Some issuers, like Bank of America and Wells Fargo, state they "may" decline internet gambling transactions, relying on merchant categorizations set by networks like Visa and Mastercard.
However, mobile sportsbooks continue to accept credit cards, with a significant portion of bettors preferring this payment method.
The CFPB said its findings underscore the need for greater transparency and consumer awareness regarding the financial implications of using credit cards for sports betting. As the industry grows, both regulators and consumers must navigate the complex landscape of fees and interest rates to avoid unexpected financial burdens.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-12-16 15:36:12
